Many creditors of insolvent estates could be losing out because liquidators are turning away genuine offers to purchase properties from the estates and insisting that they be auctioned instead.

So says Berry Everitt, MD of the Chas Everitt International property group, who notes: "In several cases lately, we have found a buyer prepared to pay the market rate for a home in an insolvent estate, only to have the offer to purchase rejected on the grounds that someone might pay more for the property at an auction.

"In one instance, we had a cash offer for R2,8-million for a property in an insolvent estate which was rejected on the grounds that the liquidators thought they would easily get R2,8-million or R2,9-million plus VAT at auction. But when the property was auctioned - three months later – the price achieved was actually only R2,79-million including VAT."

Thus, he notes, insisting on auction can easily go against what most creditors of insolvent estates want, which is for the liquidator to secure as high a price as possible for the assets in the estate and thus ensure the best possible debt repayment rate.

"And although the rules provide for the assets - including any fixed property - to be auctioned, it is quite possible for the liquidators to get permission from the Master of the Supreme Court to accept offers on such properties if they have the consent of the major creditors."

In fact, he says, deciding to auction the immovable property along with the movables in the estate increases the risk to the creditors, "because homes that stand vacant - often for months at a time - until an auction is organised are frequently vandalised and thus liable to fetch a lower price.

"Alternatively, the estate has to pay a security guard, which again diminishes the potential payout for creditors."

What is more, Everitt says, property auctions tend to attract bargain hunting speculators rather than genuine homebuyers, so it is unusual to sell a home at an insolvency auction for the market value. The creditors are quite likely to get much less than they should have for the sale of the property.

Indeed, the bank that holds the mortgage on the property may well be obliged to "buy it in" at the auction just to protect its interests as a creditor. "This means further expenditure to keep the property secure and maintained and to market it to potential buyers again, and all the while the clock is ticking on the unpaid home loan.

"Taking all this into consideration, it is difficult to see why liquidators might want to wait for an auction when there is a good offer on the table -unless they perhaps have a too-cosy arrangement with certain auctioneers. In any case, we suggest that creditors of insolvent estates wise up, and instruct liquidators to at least attempt to sell any immovable property on the open market before putting it on auction."